COMPANY

Fate of Massachusetts Tech Tax in Governor's Hands

The Massachusetts Senate voted unanimously Thursday to abolish a sales tax on software services that generated a firestorm of criticism from business leaders, following Wednesday’s action in the House of Representatives to repeal the fledgling levy.

September 27, 2013

The Massachusetts Senate voted unanimously Thursday to abolish a sales tax on software services that generated a firestorm of criticism from business leaders, following Wednesday’s action in the House of Representatives to repeal the fledgling levy.

It is now up to Governor Deval Patrick to decide whether to put his signature on a bill to kill a tax that was a major part of his initiative to fund statewide transportation projects. A decision by Patrick could come this week.

In a reversal of his original position, the governor has supported the repeal effort, but stopped short this week of saying outright that he would sign the repeal bill. “I’m waiting to see what they do,” Patrick told reporters Wednesday.

While he has said the $160 million the state expected to collect from the tax should be replaced, he isn’t expecting the Legislature to find a new source of money immediately. “We’re going to have to come back to this,” he said.

Stephen Brewer, chairman of the Senate Committee on Ways and Means, said it takes a “mature, grown up, and thoughtful” Legislature to reverse course so quickly on such a major piece of legislation. “We listened, we learned, and we acted,” he said.

Looking back, said Brewer, the tax “may not have been the wisest move taken at the time.” The Senate vote was 38 to 0 in favor of repeal.

The software levy went unnoticed by many in the technology industry until it was passed in late July as part of a transportation funding package, and went into effect seven days later. It does not appear that any money was actually collected from companies.

The transportation legislation raised taxes on cigarettes and gas, but it also added the state’s 6.25 percent sales tax to many computing services such as software consulting, and even some Web development work.